¨ APAC USD Credit Market: Asian Credit Markets strengthened post-FOMC minutes as

19 August 2016

Credit Markets Update

Yanlord on Review for Upgrade; Lebuhraya Duke 3 MYR3.64bn offer

¨      APAC USD Credit Market: Asian Credit Markets strengthened post-FOMC minutes as Asian CDS tightened 1bp to 113bps, while the IG credit spreads and non-IG bond yields tightened 2-3bps to 184.7bps and 6.26% respectively. Separately, benchmark UST yields edged lower by 1-3bps with the 2y at 0.70% (-2bps), while the 10y lost 1bp to 1.54% on extended rally from the US July Fed minutes despite better US jobless claims print at 262k (consensus: 265k). In the oil markets, Brent climbed above USD50/bbl to settle at c.USD50.9/bbl, rising 22% since 2-Aug where priced dipped to USD41.8/bbl. In the primaries, Aluminum Corporation of China (Unrated) received a massive 10x BTC for USD800m 5y bonds priced at 4% against IPT at 4.5% area.

¨      SGD Credit Market: Moody’s places Yanlord on review for upgrade. The short-to-mid curve flattened led by a 6.5bps decline in the 5y to 1.60% while the 2y dipped 5bps to 1.36%. Brent oil prices tipped above the USD50/bbl threshold yesterday, levels not seen since end-June, while interest was observed in REITs like SUNSP, MCTSP and CCTSP which were 5-10bps tighter (according to Bloomberg). Moody’s placed Yanlord Land Group’s Ba3 ratings on review for upgrade due to expected improvements in the credit profile from its robust contracted sales growth, which grew CNY17bn in 1H16, a 55% growth YoY. Meanwhile, Otto Marine (NR) has filed a winding up application against Hoe Leong Corporation, an industrial equipment and heavy machinery company, for payments owing of USD0.92m.

¨      MYR Credit Market: Leburaya Duke Fasa 3 (AA-) approaches the market with MYR3.64bn Sukuk (book open today), ranging 10-23 years at coupon of 5.14-6.43%, to part fund the construction of 32.1km expressway linking Wangsa Maju to the Kerinchi Link. The expressway is estimated at project cost of MYR5.05bn which will be constructed by Ekovest over a period of 42 months. More than half of the secondary trades were concentrated in GG and Cagamas bonds. PASB ’23 saw MYR120m settled at 3.88-3.89% (unchanged to -7bps) while Cagamas ’18-’19 tightened 3.382%-3.52%. The govvies closed steeper as the 3y and 7y MGS rallied 1bps to 2.88% and 3.41% respectively while the 10y MGS fell to 3.50%(+3bps). The MYR on the other hand gave back 0.37% to 4.0048/USD.